The Northern Territory Government’s recently announced A$150 million (NZ$168 million) desktop services contract with Fujitsu — which displaced incumbent CSC — is an example of how competition can provide user benefits, says Brad Irvine, project director for corporate and information services for the Northern Territory.
Following in the steps of federal and state government counterparts, the NT Government announced its move to a selective sourcing model, ousting CSC from a five-year, A$200 million contract.
“We have five main ICT contracts that I would classify as selective sourcing,” Irvine says.
The desktop contract is the largest at A$150 million, then telecommunications at A$30 million a year and messaging at an annual A$5 million. Two other contracts involving mainframe and non-mainframe applications development are being reviewed.
“Competition always drives value — that’s a natural dividend of the tendering process,” Irvine says, adding the desktop contract “benchmarks well”.
Irvine did not reveal the amount saved by switching providers, but says it is in the order of a 15% reduction.
“In fairness to the incumbent that’s not to say their pricing was abhorrent, it’s just separate circumstances,” he says. “CSC brought about a lot of standardisation and we had 34 departments reduced to 18 in 2002. It was a huge change and [CSC] had to standardise the file and print environment, which was a mix of Novell and Windows NT, and upgrade it to Windows 2003 and get rid of Novell.”
Irvine says CSC also implemented Active Directory “all within the price”.
Irvine says the cost projection for the next four months of the CSC contract indicates an A$5 million dollar “shortfall”.
“We conducted a thorough tendering process with more than 900 criteria and a comprehensive team of 40 people was involved in the evaluation,” he says. “At the end of the day Fujitsu put forward a very good deal [and] the proof will be in the pudding.”
The other three tenders — from HP, Unisys and CSC — are in reserve should negotiations fail, but Irvine is confident that won’t happen.
When asked about driving competition further by breaking up the desktop contract, Ivine replied that it was previously considered but would have introduced too much complexity.
“We reviewed that in 2005, but by having multiple players at multiple levels it was logistically challenging and it’s hard to get organisations working in unison,” he says. “And if there were multiple vendors in that space all we could see was mutual finger pointing.”
Regarding the obligation of outsourcers to sub-contract to local, mid-tier providers, Irvine says that was a “significant” consideration.
“We codify that in the final agreement and provide sanctions,” he says. “It would be irresponsible for us to have a contract without provisions to give work to [local] SMEs.”
Irvine says CSC did a good job in meeting subcontractor objectives set out in 2001.